Business: Heard at the Show

Roll the clock back 20 years, to when many of us were
getting our contracting businesses started. Where did we go to
learn more about the trade? If you were one of the fortunate
ones, you stepped into a second- or third-generation family
operation, where you continued to build on valuable experience.
Some of us went to work for other builders, and many were lucky
enough to find good mentors willing to share their knowledge.
There were a few content-oriented magazines around —
JLC was one of them — where once a month we could pick
up a few insights from other builders. But, beyond a few
construction management courses, which we didn't have time to
take anyway, that was about it. Most of us learned building the
hard way, mistakes and all.

There was certainly nothing around like JLC Live — an
educational conference, tool and product fair, peer networking
opportunity, and builder carnival all rolled into one. I can't
think of anywhere else you can listen to an expert tell you how
to write contracts to protect yourself against mold liability
(advice that you'd pay a mint for), while downstairs your
up-and-coming lead carpenter is learning techniques from
professional contractors for installing crown molding (or
windows, or drywall, or decking, or siding, or tile —
the list goes on) or checking out hundreds of new products and
tools in a hands-on environment. If you've ever been to JLC
Live, you know what I mean; if you haven't, you really ought to
consider it.

We've dedicated this month's Business column to nuggets picked
up from the speakers at this spring's JLC Live shows in
Providence and Milwaukee. Many of these speakers will be
returning to our shows this fall in Columbus, Ohio, and
Portland, Ore. We hope to see you there.

Don Jackson
JLC Editor

Paying Yourself Fairly

"About 10% of the builders I meet with don't seem to believe
in profit. They think profit is un-American — 'All I
want to do is just break even,' they'll say.

"You owe it to yourself, you have the right, to earn 20% of
your gross sales before taxes. So if you do a million a year,
you should be paying yourself a total compensation package of
$200,000 per year. And you should be earning that money in an
average of 50 hours per week.

"The goal is to grow your business to where it can run without
you. Did you ever go on vacation, come back and say, 'Did you
miss me?' and have your employees answer, 'No'? The point isn't
to get upset. Instead, you should take more days off until you
find out how long it takes for them to miss you. What you're
really looking for is for your employees to want to please you
when you're away, for them to want to run things better when
you're away (that way, they hope that maybe you'll stay away
longer). Plus, it might be more profitable without you around
to micromanage what's going on." — Les Cunningham,
Business Networks, Eugene, Ore.

The Value of Time Sheets

"The reason we all fill out a time card is because I want to
know what everybody is doing, how they are working toward the
goals of my company. My own personal time sheets include things
like sales, production time, ordering, supervising,
typing.

"I type my own contracts, and I want to know how much time
this takes me, also how much time I spend in the field, whether
supervising for quality control or framing.

"I know, for instance, that between my brother and me, we sell
the entire million-four volume that my company does in about
650 hours per year. I know that because I've been filling out a
time card for 27 years. And I know many remodelers who do $1.4
million who would have hired a full-time salesperson. Now, how
bright would it have been if I went out and hired a full-time
salesman and paid them $50,000 or $60,000 per year, knowing
that I only take 687 hours per year to do that job? But if you
didn't have the time card, wouldn't a lot of people think that
a guy doing a million-four should have his own salesman?

"We believe that an average salesperson selling jobs around
$20,000 and higher should be able to do $21/2 million in sales
as well as estimate. So I really don't need a salesperson until
I'm doing $2.4 million and I stop doing any sales at all. We
also believe, based on our time cards, that a production
manager can run jobs between $1.5 and $1.8 million. The way my
company is set up, I actually know at what volumes it makes
economic sense to hire somebody." — Alan Hanbury,
House of Hanbury Builders, Newington, Conn.

Smart Vapor Barriers

"What do you do in a mixed climate where there's a little
cooling and a little heating going on? What you should be doing
is using a 'smart' vapor retarder that knows what time of year
it is. The best material for this is the kraft facing on batt
insulation. When that paper facing is dry, it acts as a vapor
retarder. That's the case in the wintertime when you want to
stop moisture generated inside the building from moving outward
and condensing in a wall. In the summertime, the moisture
content of that kraft paper goes up a little, and as it goes
up, the paper becomes more breathable. That allows hot humid
indoor air to pass through the wall and be dehumidified inside
the building.

"Polyethylene sheeting, on the other hand, is a stupid vapor
retarder. It never knows what time of year it is. That's why we
get into trouble much more often with poly. You can get away
with it in a northern climate, although I don't recommend it.
But when you use it in mixed and cooling climates, you have
problems." — Stephen Smulski, Wood Science
Specialists, Shutesbury, Mass.

Navigating the Insurance
Crisis

"Premiums have gone up for all of you, but the market is
definitely a little friendlier to remodelers than home
builders. What an underwriter wants to see these days is
someone who is subbing out less than 25% of the work. They're
very strict about this now. Your accounting can make a big
difference here, because whatever you can do to keep that
amount down makes you more attractive to insurers. For example,
say you've contracted with a sub for $20,000, but that figure
includes the cost of his materials. If you back out those
materials and pay for them yourself, you may be able to reduce
the contract with the sub to $10,000. If you were up at 28%
before, that might get you down to the 25% level.

"Up until a year or two ago, everyone in this room was driven
crazy by insurance people pounding on the door trying to sell
you something. Now you're the ones that have to sell yourselves
to the insurance companies, and it's a tough thing to do.
They're looking very closely at the kinds of management
controls you have in place. They're looking for strong
commitments from owners on loss control and prevention. They're
not looking for talk along the lines of 'Yes, we're very
loss-control minded, and we're very careful.' They want to see
well-formulated programs with documentation showing what kinds
of plans you have in place." — Michael D'Orlando,
Educational Training and Consulting Services, Hudson,
Mass.

Putting High-Tech Tools to
Work

"You look a lot more professional doing a sales presentation
on a laptop than with a pencil and paper. I use Chief Architect
because, relative to other programs I've tried, it's easy to
use and has a shorter learning curve. The level at which you go
into a CAD program makes all the difference in the world. Spend
the necessary time with the program to become proficient.

"Bringing CAD skills to the sales call puts prospects in the
picture and helps close the sale. It's very easy to provide
clients with a pop-top view of their proposed remodel,
including specific finishes, in just a few minutes —
while they watch. I can also stand with my back against a
client's home, shoot a digital photo of their back yard, then
merge that image into the CAD drawing of their project and show
them the view they'll have through their new kitchen window, in
elevation.

"Photo-documenting existing conditions settles a whole lot of
arguments about the condition of the project before you began
work — things like cracked brick, rotten trim,
termites, undersized or altered framing, the condition of the
plumbing, wiring, and ductwork.

"There's also a website that, for a fee, provides an aerial
view along with an incredible amount of information on any
house I want to look at. You can learn more about a prospective
client's property than they know themselves: land assessment,
how much the house sold for, what it's made of, a soils map,
flood zone indicator, proximity to airport, noise and decibel
ratings — the list goes on. I prepare myself with this
kind of information before I make that first sales call. I can
tell the prospect when their home was built, what the zoning
restrictions are, what the remodeling value limit ought to be
relative to resale value, and so on. It makes me look a whole
lot sharper than the other guys." — Robert Criner,
Criner Construction Co., Yorktown, Va.

On-Site Communication Center

"Establish a communication center in the house. Hang up a
dry-erase board for messages, with the plans nearby. Put up the
project address for deliveries. Put up the client's name so
your subs can say good morning. Post emergency numbers
— police, fire, ambulance, and poison control. Not
only does this make your life easier, it tells the client
they've hired an organization, not just a bunch of guys to
pound nails. Think about this: If you had to call the poison
center because the client's toddler drank some polyurethane,
where would you start? Isn't it better to have that information
where everybody can find it?" — David Booth Beers,
House of Hanbury Builders, Newington, Conn.

Avoiding Liability for Subs

"Insurance companies are cracking down on sub coverages. When
audit time comes, they look at your certificates, and they want
to see if your subs were insured the entire time they were
working for you. The insurance companies are really harassing
people about this issue because if your sub doesn't have
liability insurance and you do, your liability insurance is
going to have to pay, and they don't like that. Insurance
companies are not in the business of paying claims. They're in
the business of collecting premiums. They don't want to pay a
claim, and they will up your premium to cover uninsured subs or
even cover a sub whose certificate has lapsed. He may have had
insurance; he just didn't pay the most current premium. You can
get some very nasty surprises because of that.

"For example, say a sub dropped his workers' comp partway
through the job, and one of his employees gets injured. If your
sub doesn't have workers' comp for his employees, his employees
can then recover against you. But they don't recover against
you under workers' comp — they come in under your
liability insurance. Instead of asking for a portion of their
lost wages and hospital bills, which is what they get under
workers' comp, they come after you under liability, which means
injury, pain, and suffering, and no limit on lost wages. The
amount paid out in a liability claim can be much higher than a
workers' comp claim." — Quenda Behler Story,
attorney, remodeler, and JLC legal columnist, Okemos,
Mich.

Listening Skills

"The art of authentic communication lies in understanding who
we are so that we can listen to others in a deeper, more
knowing way. We all have our own 'paradigm,' or our own way of
seeing the world, that can make us blind to other perspectives.
A 'paradigm shift' is critical to improving
communication.

"Most of us don't listen to understand, but simply to hear an
opening so we can jump in with our own two cents. But you can't
listen when you're thinking of what you want to say next.

"Think about what people want, be an investigator. Listen
effectively. Enquire about the other's perspective, then get to
your own comments. This is very different from the way most of
us operate.

"Consider your own listening style and where you are on a
scale from one to five: 1) ignoring, 2) pretending, 3)
selective, 4) attentive, 5) empathetic and understanding.

"To move your style toward Level 5, stop the chatter in the
back of your head, stop thinking of what you want to say next,
stop multitasking. Focus, pay attention, be present. Make eye
contact — 80% of communication is nonverbal. Ask
questions for clarification — the best way to listen
is to ask questions. Find ways to summarize and paraphrase what
you're hearing. Put what you're hearing in your own words and
repeat it back. Go for clarity." — Peter Cole, Cole
Consulting, Burlington, Vt.

Eliminating Punch Lists

"To eliminate the punch list, we have to change our attitudes
and behaviors. Many punch list items are from shoddy work.
Establish a company-wide quality standard. That way all of your
crew knows what's expected.

"It's also a good idea to put a clause in your contract that
says you have the discretion to either fix or replace an item.
Clients and contractors often have different ideas about
whether something should be replaced. Use accurate and detailed
specifications in the contract. For example, are you using
stain-grade or paint-grade material to case the windows? Say it
up front, put it in writing, and everyone's on the same
page.

Seen at the Show

A highlight of every JLC Live is the
teaching workshops that take place throughout the show on the
expo floor — more than a dozen on any given day. Below
are comments from some of the presenters about why they value
what they do.

Roofing Refinements

"Builders love working with their hands. Traditionally, we
learn from each other, by doing, and that process is still
alive today on every job site. But the site is not always
conducive to learning fast enough to keep up with our ever
changing industry. That's where JLC Live excels — at
combining, in a job-site learning environment, time-tested
fundamentals with innovative materials, tools, and practices."
— Mike Guertin, builder, East Greenwich,
R.I.

Master Stair Building

"It's been a real treat when I've asked
volunteers from the audience to come up and work with Tom Carty
[carpenter and JLC Live presenter] and me. I've had some of
them work on stage with us for more than a couple of hours. I
pick the volunteers with some care, usually after they ask
perceptive questions, and I'm always amazed how easy it is to
fit them into the stage 'crew.' There must be something in the
language and spirit of cooperation that builders share all
across the country." —

Jed Dixon, North Road
Stairs, Foster, R.I.

Structural Basics

"JLC Live is about using 'real-time'
demonstrations by 'real-time' contractors to show attendees how
to save real time — or do a job better. It's a great
opportunity for attendees to stop the action to ask questions
— to get more detail or explore alternative methods."
— Carl Hagstrom, Northeast Design Group, Montrose,
Pa.

Finish Tricks

"There are no continuing education schools for contractors,
and though magazines help enormously, there's nothing that can
replace live presentations when it comes to demonstrating
construction techniques. JLC Live is changing the nature of
construction education.
"Most of us have learned our craft the
hard way, through trial and error; we've learned that
experience is the key to success. But contractors and
carpenters should try learning the easy way, too —
through education." — Gary Katz, G.C., Reseda,
Calif.